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Where Do Hedge Funds Stand On EverQuote, Inc. (EVER)?

Asma UL Husna
·6 min read

In this article we will analyze whether EverQuote, Inc. (NASDAQ:EVER) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is EVER a good stock to buy now? EverQuote, Inc. (NASDAQ:EVER) was in 21 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. EVER investors should be aware of a decrease in support from the world's most elite money managers of late. There were 23 hedge funds in our database with EVER holdings at the end of June. Our calculations also showed that EVER isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Roger Ibbotson of Zebra Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a peek at the fresh hedge fund action encompassing EverQuote, Inc. (NASDAQ:EVER).

Do Hedge Funds Think EVER Is A Good Stock To Buy Now?

At Q3's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in EVER a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in EverQuote, Inc. (NASDAQ:EVER), which was worth $36.9 million at the end of the third quarter. On the second spot was Shannon River Fund Management which amassed $33.9 million worth of shares. Zevenbergen Capital Investments, G2 Investment Partners Management, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to EverQuote, Inc. (NASDAQ:EVER), around 6.87% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, earmarking 4.07 percent of its 13F equity portfolio to EVER.

Seeing as EverQuote, Inc. (NASDAQ:EVER) has witnessed falling interest from hedge fund managers, we can see that there lies a certain "tier" of money managers that slashed their positions entirely last quarter. Interestingly, Richard Driehaus's Driehaus Capital cut the largest stake of all the hedgies followed by Insider Monkey, valued at close to $26.1 million in stock, and Chuck Royce's Royce & Associates was right behind this move, as the fund dropped about $1.3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to EverQuote, Inc. (NASDAQ:EVER). We will take a look at Avidity Biosciences, Inc. (NASDAQ:RNA), Genetron Holdings Limited (NASDAQ:GTH), NANO-X IMAGING LTD (NASDAQ:NNOX), Lindsay Corporation (NYSE:LNN), Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Ontrak, Inc. (NASDAQ:OTRK), and Safety Insurance Group, Inc. (NASDAQ:SAFT). This group of stocks' market valuations match EVER's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNA,17,311619,-7 GTH,12,99741,-4 NNOX,6,23654,6 LNN,16,161024,5 ARCT,20,171723,-1 OTRK,12,12778,1 SAFT,17,42473,4 Average,14.3,117573,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.3 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $179 million in EVER's case. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) is the most popular stock in this table. On the other hand NANO-X IMAGING LTD (NASDAQ:NNOX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks EverQuote, Inc. (NASDAQ:EVER) is more popular among hedge funds. Our overall hedge fund sentiment score for EVER is 80.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Unfortunately EVER wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EVER were disappointed as the stock returned -6.1% since the end of the third quarter (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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